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Satellite analyst William Kidd and others eyeing the satellite TV business at Lehman Brothers said Friday that - in their newest opinion as a group - the most likely scenario for the pending EchoStar/Hughes merger is that the deal will be blocked.

In an extensive research note on the transaction released last week, Kidd and his Lehman Brothers colleagues reiterated that "we still think the transaction is important to the satellite industry and vital to rural TV households." However, Kidd said the firm is "a bit less confident on the likelihood of an EchoStar/Hughes transaction than a few months ago," given that the deal hasn't created more positive momentum with regulators and politicians.

Kidd addressed recent speculation that the Justice Department and its antitrust staff may fight the merger proposal. "Although we cannot give credibility to certain reports, speculation has risen that the DOJ has started to research how it would defend itself against an EchoStar lawsuit," Kidd said.

Kidd said once the regulatory process for the merger nears completion, the ultimate resolution of the deal could take an additional six to nine months, given that EchoStar may dispute any regulatory decision as well as its PanAmSat purchase. If the deal falls through, EchoStar is poised to buy PanAmSat as part of the break-up process.

On the financial side, Lehman Brothers concluded that EchoStar's equity offers the most favorable risk-return ratio, particularly since the firm sees the downside risk at the current price levels as minimal.

From SkyReport (Used with Permission)
 
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